Wind Power Subsidies: The Best Use Of Taxpayers Cash?

The U.S. taxpayers are in better than $16 billion dollars now and just got hooked for another $12.1 billion more. That’s $161,333 per for 75,000 jobs. Admittedly, compared to some government subsidy deals this looks cheap. (Roll Eyes)

Subsidizing wind energy surely should be at the end of the subsidy era. The era is 20 years old now.

The subsidy locked up in the fiscal cliff deal only includes a one-year extension of tax credits for the wind-energy industry. The whole thing will be with us for recurring years to come. The worst problem is no one has hard data to know if wind can ever stand on its own.

image via Shutterstock

As noted on these pages just recently the idea that government can or should pick industrial backing isn’t working out well. But wind energy must be given its due – the wind has energy, its harvested, and gets on the grid – at a rather dear price. The business does work when big freebies to the investors is kicked in with a 2.2-cent per kilowatt-hour tax credit over the next 10 years.

There are other reasons to be suspicious beyond the direct costs. Wind’s advantage puts the other alternatives, plus natural gas, coal and nuclear energy at an economic disadvantage.

Tennessee Republican Sen. Lamar Alexander points out an important point, “A better idea is to reduce the debt and increase research for solar, batteries, carbon capture from coal plants, more energy-efficient buildings, advanced biofuels and the disposal of nuclear waste,” Alexander wrote in The National Journal. “Then let the marketplace decide which fuels can produce enough clean, cheap reliable energy.”

The wind industry looks like the voice of reason. Wind energy lobbyists, who descended on Capitol Hill in the final weeks of the negotiations, have suggested phasing out the credits over perhaps the next five years to create less uncertainty and avoid the annual negotiations.

Still, the new law offers more sense. The production tax credit pays eligible projects 2.2 cents per kilowatt hour for the first 10 years of production, making the energy competitive with electricity generated by natural gas. The investment tax credit pays 30 percent of costs for small, community wind farms and offshore wind projects.

Lawmakers tweaked the eligibility requirements so that projects that begin construction in 2013 may apply for the incentives. Previously, projects had to be generating power by year’s end to qualify. That was an uncertain prospect that made it more difficult to attract financing, given the length of time allowed only being only 18 to 24 months and the complexity of building a wind farm.

Rob Gramlich, interim chief executive officer of the American Wind Energy Association (AWEA), said in a prepared statement, “Now we can continue to provide America with more clean, affordable, home-grown energy, and keep growing a new manufacturing sector that’s now making nearly 70 percent of our wind turbines in the US.”

The AWEA said the deal agreed on by Congress would protect all projects that begin construction in 2013, even if they’re not completed until later. That may or may not be a good thing. Open-ended deals tend to be exploited in unforeseen ways.

Corn ethanol lost one of its subsidies last year and survives nicely. There is still plenty of corn for both food and fuel. There will always be plenty of wind, but the industry will never be what its worth until it gets its hand out of the public’s pocket.

The wind business has a lot of growing up to do and maturation would encourage more efficiency and better cost controls. One day they might even figure out how to increase productivity, improve output and store power. But with all the focus on needing the government freebie, the real work is going to be overlooked.

But congratulations are in order. Wind’s lobbyists showed their power and got the short-term goal handled. Now can management figure out how to stand up the business on their own?

Why are we presented with this problematical piece of blithe misrepresentation? I have not noticed any of the oil companies stepping up to pay for our little trillion dollar distraction in Iraq and then turn around and charge their customers for it. One might argue that what they did to Iran will prove to be even more expensive.

The claim about the cost of the 75,000 jobs even Mr. Westerhaus is willing to notice neglects the matter of how many years the money is spread over, and how little of it leaves the country before funding other jobs. Since a lot of ostensibly reasonable people are unwilling to tax carbon directly, the actual behavior of markets is rather out of the question, isn’t it? The bottom line is that subsidizing wind generation may not be the best way to address global climate disruption, but it sure beats making life easy for oil producers or the coal guys.